Landlords spending longer mortgage-hunting thanks to new rules: but is it all bad?
Think tank Demos recently highlighted a funding divide between SMEs in the north and south of England. What does this divide look like, and what can be done about it?
A nation divided
The Demos report shows that SMEs in Yorkshire and Humber, the North East and the North West are more likely to suffer loan rejections than their counterparts in the South East and South West.
These findings confirm other data that show three and five-year business survival rates to be lower in the same areas. Considered together, these studies paint a grim picture: banks view some areas as risky, meaning that firms in these regions can't get funding and are more likely to fail.
What’s being done?
Government policies intended to reduce barriers to bank lending and encourage competition have not resulted in meaningful change – 90% of business loans in England and Wales still come from four large providers.
Even initiatives such as the British Business Bank, National Loan Guarantee Scheme and Funding for Lending have replicated geographic inequalities. In this context, Demos believes that the UK must develop different kinds of bank, including networks of local institutions that understand local businesses. While this is an interesting idea, plans such as these will take a long time to bear fruit, by which time it may be too late for many struggling businesses.
How can SMEs respond?
SMEs in high loan rejection areas may have to search for new sources of finance if they wish to keep growing. This could mean looking at peer-to-peer lending, or perhaps reaching out to angel investors. However, given our previous articles on the detrimental effects of SMEs' late payment culture, it is clear to us that debt management is key to healthy small business development.
SMEs are more likely to receive backing if they can show evidence of secure cash flows. Sensitive debt collection can help small businesses to keep their finances healthy, and may be crucial in providing the stability needed for sustainable growth.
If you're an SME owner who's struggling with loan rejection and late payment culture, contact Dukes Bailiffs to find out how our Enforcement Agents could help you today.